Orsted · OMXCOP:ORSTED
Orsted — Ørsted — FY2018 Earnings Presentation
47 slides from Orsted's earnings presentation, Jan 31, 2019
Slide 1: Investor presentation Q4 2018
ak. . Investor el 201:
Slide 2: Disclaimer
DISCLAIMER This presentation contains certain forward-looking statements, including but not limited to, the statements and expectations contained in the “Financial Outlook” section of this presentation. Statements herein, other than statements of historical fact, regarding our future results of oper
Slide 3: Strong operational and financial results in 2018
Strong operational and financial results in 2018 EBITDA Outperformance vs. original guidance of DKKbn DKK 12-13bn Non-recurring items 30.0 Offshore new partnerships Better than expected performance from existing Existing activities activities DKK 2-3bn: • Strong progress on offshore construction pro
Slide 4: Significant investment growth in 2018
Significant investment growth in 2018 Gross investments Investment growth vs. original guidance of DKKbn 24.5 DKK 16-18bn Deepwater Wind Lincoln Clean Energy 4.0 Acquisitions of DKK 9.6bn: Onshore • Lincoln Clean Energy and Deepwater Wind Bioenergy 17.7 acquired in 2018 5.6 Customer Solutions 1.4 Of
Slide 5: Proposed dividend of DKK 9.75 per share - An 8.3% increase
Proposed dividend of DKK 9.75 per share - An 8.3% increase Dividend Dividend DKK per share • The Board of Directors recommend a dividend of DKK 9.75 per share to be paid for 2018 +8.3% +50% • Increase of 8.3% and a total of DKK 4.1 billion 9.75 • Dividend expected to be paid out on 8 March 2019 9.00
Slide 6: Strategic and operational progress in Q4 2018
Strategic and operational progress in Q4 2018 Highlights – Q4 2018 • EBITDA from offshore wind farms in operation up by 26% vs. Q4 2017 • Ørsted selected as preferred bidder for an additional 104MW offshore wind capacity in Connecticut • Submitted bids in the Rhode Island and New Jersey auctions • S
Slide 7: Taiwan announces 2019 feed-in-tariff
Taiwan announces 2019 feed-in-tariff 900MW Changhua 1 and 2a projects Greater Changhua projects • Taiwan’s Bureau of Energy announced on 30 January the feed-in-tariff for projects which sign a power purchase agreement with Taipower in 2019 • Developers can choose between: − 20-year flat tariff of TW
Slide 8: Exit of Danish power distribution and residential customer businesses continues in a new track
Exit of Danish power distribution and residential customer businesses continues in a new track • Announced the plan to divest our Danish power distribution and residential customer businesses in June 2018 • On 13 January 2019, the Danish Ministry of Finance informed that there was no longer the requ
Slide 9: Construction programme – Offshore
Construction programme – Offshore Borkum Project Hornsea 1 Borssele 1&2 Virginia Hornsea 2 Riffgrund 2 Country Asset type Capacity 465MW 1,218MW 752MW 12MW (EPC) 1,386MW Expected Completed Q4 2020 / H2 2019 H1 2021 H1 2022 completion Q4 2018 Q1 2021 Status On track On track On track On track Comment
Slide 10: Construction programme – Onshore, Bioenergy and Customer Solutions
Construction programme – Onshore, Bioenergy and Customer Solutions Asnæs Renescience Smart meter Project Tahoka Lockett CHP plant Northwich roll-out Country Asset type 129MW Heat, 120,000 tonnes 1 million Capacity 300MW 184MW 25MW Power waste installations Expected Completed Q3 2019 Q4 2019 H1 2019
Slide 11: Offshore market development – US
Offshore market development – US • Timing of solicitation of 800MW to be announced Massachusetts • Passed bill which could increase offshore wind capacity to 3.2GW by 2035 • Three new offshore lease areas awarded through auction on 13-14 December 2018 • 800MW offshore wind solicitation with deadline
Slide 12: Offshore market development – Europe
Offshore market development – Europe • Next UK CfD auction to be initiated in May 2019, subsequent auctions every two years • Target annual build-out of 1-2GW to reach 30GW capacity by 2030 United Kingdom • Hornsea 3 consent process moving forward as planned • Race Bank Extension agreement for lease
Slide 13: Offshore market development – APAC
Offshore market development – APAC • Taiwan has met its target of awarding 5.5GW to be developed by 2025 Taiwan • Auctions of additional 4.5 GW are being planned for post 2025 • Greater Changhua 3 – 600MW ready for future auctions • Target of 10GW offshore and onshore wind power to be developed by 2
Slide 14: Onshore pipeline development
Onshore pipeline development Projects with offtake contracted • Executed 12 year 250MW PPA with ExxonMobil Sage Draw Wind • Executed Interconnection Agreement 300MW, ERCOT West • Expected FID in H1 2019 and COD in 2020 • 12 year PPA with Smucker Co, Avery Dennison and Vail Resort for >70% capacity P
Slide 15: Q4 – Significant impact from Hornsea 1 transaction
Q4 – Significant impact from Hornsea 1 transaction EBITDA Net profit Free cash flow DKKm DKKm DKKm 6,200 44 19,206 15,160 12,148 11,398 -37 -23 -10 13,032 9,350 Q4 2017 Offshore Onshore Bioenergy Customer Other Q4 2018 Q4 2017 Q4 2018 Q4 2017 Q4 2018 Solutions EBITDA increased by DKK 6.2bn Net profi
Slide 16: Full-year – All time high EBITDA and Net profit
Full-year – All time high EBITDA and Net profit EBITDA Offshore new partnerships Net profit Free cash flow DKKm Existing activities DKKm DKKm 1,943 44 215 149 30,029 19,486 5,812 5,271 -112 22,519 15.1bn 13,279 9.8bn 12.7bn 15.0bn 261 FY 2017 Offshore Offshore Onshore Bioenergy Customer Other FY 201
Slide 17: Net working capital development
Net working capital development Development in work-in-progress Capital employed – Net working capital • Significant funds temporarily tied up in construction of DKKbn transmission assets in the UK - part of operating cash flow Work-in-progress 4.4 • Funds tied up in work-in-progress of DKK 9.7bn en
Slide 18: Net cash position and solid financial ratios
Net cash position and solid financial ratios Net interest-bearing debt development FFO / Adj. net debt ROCE (LTM) DKKm % % 24,481 69 32 25 50 5,319 -1,517 -2,219 -19,950 -209 -10,343 31 Dec CFO CAPEX Divest- Disc. Hybrid 31 Dec 2017 ments operations coupon 2018 31 Dec 31 Dec 31 Dec 31 Dec & other 20
Slide 19: Offshore – Q4 financial performance
Offshore – Q4 financial performance Power generation Denmark EBITDA Sites, O&Ms & PPA Free cash flow TWh United Kingdom DKKm Partnerships DKKm Germany Other, incl. DEVEX 3.3 18,791 15,253 2.9 13,417 0.7 4,053 0.8 12,591 3,226 2.0 15,413 1.7 10,033 0.4 0.6 -668 -675 Q4 2017 Q4 2018 Q4 2017 Q4 2018 Q4
Slide 20: Offshore – Full-year financial performance
Offshore – Full-year financial performance Power generation Denmark EBITDA Sites, O&Ms & PPA Free cash flow ROCE (LTM) TWh United Kingdom DKKm Partnerships DKKm % Germany Other, incl. DEVEX 10.0 27,809 10,409 37 8.5 2.2 20,595 11,042 28 2.5 8,529 4,628 6.1 4.5 18,765 13,667 1.5 1.7 -1,601 -1,998 FY
Slide 21: Onshore – Full-year financial performance
Onshore – Full-year financial performance Power generation EBITDA Sites Free cash flow GWh DKKm PTCs and tax incentives DKKm Other, incl. DEVEX 552 44 40 85 -81 -4,910 FY 2018 FY 2018 FY 2018 Power generation of 552GWh EBITDA of DKK 44m FCF of DKK -4.9bn • Primarily generation from • EBITDA from Sit
Slide 22: Bioenergy – Q4 and full-year financial performance
Bioenergy – Q4 and full-year financial performance EBITDA – Q4 Heat Free cash flow – Q4 EBITDA – FY Heat Free cash flow – FY DKKm Ancillary services DKKm DKKm Ancillary services DKKm Power Power 518 240 203 579 367 152 245 765 235 695 321 404 122 133 147 -117 -864 -802 -175 -796 Q4 2017 Q4 2018 Q4 2
Slide 23: Customer Solutions – Q4 and full-year financial performance
Customer Solutions – Q4 and full-year financial performance EBITDA – Q4 Free cash flow – Q4 EBITDA – FY Free cash flow – FY DKKm DKKm DKKm DKKm 179 146 2,082 1,050 1,970 156 -71 -1,289 Q4 2017 Q4 2018 Q4 2017 Q4 2018 FY 2017 FY 2018 FY 2017 FY 2018 EBITDA at DKK 0.2bn FCF increased DKK 0.2bn EBITDA
Slide 24: Outlook – Guidance for 2019
Outlook – Guidance for 2019 2019 EBITDA expected to be DKK 15.5-16.5 billion Guidance on EBITDA excl. new partnerships DKKbn • Positive impact of DKK 0.6bn from implementation of IFRS 16 (majority in Offshore) • Offshore site EBITDA positively impacted by ramp-up 15.5-16.5 • No new partnerships expe
Slide 25: Outlook – Business unit EBITDA FY 2019 vs. FY 2018
Outlook – Business unit EBITDA FY 2019 vs. FY 2018 Offshore – Higher Onshore – Significantly higher • Earnings from offshore wind farms in operation expected to • Acquired Lincoln Clean Energy on 1 October 2018 increase relative to 2018. Full commissioning of Hornsea 1 in H2 • 2019 will be the first
Slide 26: Outlook – Business unit EBITDA FY 2019 vs. FY 2018
Outlook – Business unit EBITDA FY 2019 vs. FY 2018 Bioenergy – Higher Customer Solutions – Significantly lower • Total EBITDA from heat and power generation activities • Significant decline in Markets expected, due to gains from expected to increase, primarily from expected increased increasing gas
Slide 27: Financial estimates and policies
Financial estimates and policies Financial estimates Target Financial policies Target Total capex spend, 2019-2025 DKK 200bn Rating (Moody’s/S&P/Fitch) Baa1/BBB+/BBB+ Capex allocation split, 2019-2025: FFO/Adjusted net debt Around 30% - Offshore 75-85% Dividend policy: Ambition to increase the divid
Slide 28: Q&A
Q&A Conference call DK: +45 35 44 55 83 UK: +44 203 194 0544 US: +1 855 269 2604 For questions, please press 01
Slide 29: Appendix
Appendix Orsted
Slide 30: Offshore wind build-out plan
Offshore wind build-out plan Installed capacity 950 12,841 MW 920 1,142 900 1,386 8,929 752 1,218 6,791 5,573 Operational Hornsea 1 Total by Borssele Hornsea 2 Decided (FID) Greater German Greater Deepwater Decided & Q4 2018 2020 1&2 capacity Changhua Development Changhua Wind portfolio Awarded (202
Slide 31: Onshore wind build-out plan
Onshore wind build-out plan Installed capacity 650 2,527 MW 350 1,877 230 1,527 300 184 813 Operational Lockett Sage Draw Plum Creek Total by Permian Solar Total by Pipeline Total by Q4 2018 2020 2021 2022 Region ERCOT ERCOT SPP ERCOT Expected Q3 2019 2020 2020 2021 completion 75 x 2.45MW 120 x 2.5M
Slide 32: Group – Financial highlights
Group – Financial highlights FINANCIAL HIGHLIGHTS Q4 2018 Q4 2017 D FY 2018 FY 2017 D EBITDA DKKm 19,206 13,032 47% 30,029 22,519 33% • Offshore 18,791 12,591 49% 27,809 20,595 35% • Onshore 44 - n.a. 44 - n.a. • Bioenergy 203 240 (15%) 367 152 141% • Customer Solutions 156 179 (13%) 1,970 2,082 (5%
Slide 33: Offshore – Financial highlights
Offshore – Financial highlights FINANCIAL HIGHLIGHTS Q4 2018 Q4 2017 D WIND SPEED 2017 (m/s) 2018 EBITDA DKKm 18,791 12,591 49% Normal wind year • Sites incl. O&Ms and PPAs 4,053 3,226 26% • Partnership agreements and farm-down gains 15,413 10,033 54% • Other incl. A2SEA and project development (675
Slide 34: Onshore – Financial highlights
Onshore – Financial highlights FINANCIAL HIGHLIGHTS Q4 2018 EBITDA DKKm 44 • Sites 40 • Production tax credits and tax incentives 85 • Other incl. project development (81) ROCE1 % (0.3) KEY BUSINESS DRIVERS Power generation TWh 0.6 Wind speed m/s 7.3 Availability % 92 Load factor % 41 Installed capa
Slide 35: Bioenergy – Financial highlights
Bioenergy – Financial highlights FINANCIAL HIGHLIGHTS Q4 2018 Q4 2017 D EBITDA DKKm 203 240 (15%) • Heat 245 235 4% • Ancillary services 133 122 9% • Power (175) (117) 50% Free cash flow 579 147 294% KEY BUSINESS DRIVERS Heat generation TWh 2.8 2.8 (0%) Power generation TWh 1.8 2.3 (22%) Degree days
Slide 36: Customer Solutions – Financial highlights
Customer Solutions – Financial highlights FINANCIAL HIGHLIGHTS Q4 2018 Q4 2017 D EBITDA DKKm 156 179 (13%) • Distribution 299 172 74% • Sales (72) 21 n.a. • Markets 57 575 (90%) • LNG (128) (589) (78%) ROCE1 % 17.6 13.1 4.5%p KEY BUSINESS DRIVERS RAB Power DKKm 10,957 10,623 3% Gas sales TWh 26.0 36
Slide 37: Currency and energy exposure
Currency and energy exposure Currency exposure 2019-2023 Energy exposure 2019-2023 DKKm Before hedging DKKm Before hedging After hedging After hedging 62.2 19.3 16.6 7.1 2.2 1.6 0.3 -2.5 -2.5 -0.1 -0.1 -2.4 GBP* USD Oil Gas Power Spread Risk after hedging, Effect of price +10% Effect of price +10% R
Slide 38: Capital employed
Capital employed CAPITAL EMPLOYED, DKKm FY 2018 FY 2017 Capital employed by segment Intangible assets and property and equipment 84,832 76,534 %, FY 2018 Equity Investments and non-current receivables 1,445 1,187 Offshore Bioenergy Net working capital, work in progress 9,654 7,526 Onshore Customer S
Slide 39: FFO/Adjusted net debt calculation
FFO/Adjusted net debt calculation FUNDS FROM OPERATIONS / ADJUSTED NET DEBT (DKKm) FY 2018 FY 2017 EBITDA – Business Performance 30,029 22,519 Interest expenses, net (877) (629) Reversal of interest expenses transferred to assets (506) (754) Interest element of decommission obligations (192) (194) 5
Slide 40: Debt overview
Debt overview Gross debt and hybrids Long term gross debt maturity schedule Q4 Q4 2018 2018, DKKbn Cost of Modified Avg. time to debt (%) duration (%) maturity (years) Bond loans 4.0 8.2 10.5 Bank loans 2.3 0.5 6.1 9% Total 3.8 7.3 9.9 12 33% 40.98 10 DKKbn 58% 8 6 4 2 Bonds 0 2019 2020 2021 2022 20
Slide 41: Hybrid capital in short
Hybrid capital in short Hybrid capital can broadly be defined as • Deeply subordinated and only senior to Ørsted has made use of hybrid capital to funding instruments that combine features of common equity maintain our ratings at target level in debt and equity in a cost-efficient manner: connection
Slide 42: Ørsted Green Bonds
Ørsted Green Bonds Allocated amount: Allocated amount: Bond type Green Senior Bond Green Hybrid Bond Projects Green Senior Bond Green Hybrid Bond Face Value (EURm) 750 500 Total Offshore Wind 2018 2017 2018 2017 DKKm Green Bond net proceeds 5,499 3,674 Borkum Riffgrund 2 2,149 500 500 2,649 (DKKm) S
Slide 43: Financing strategy
Financing strategy We have a centralised financing strategy All cash flow generated by our subsidiaries as customary for vertically and supports the creditworthiness and rating horizontally integrated European energy of and thus the debt taken up by the utilities. parent company, Ørsted A/S. The str
Slide 44: Currency risk management
Currency risk management General hedging principles * The main principle is to hedge highly certain cash flows, such as FX from hedged energy. * Cost-of-hedging minimized by netting of exposures, use of local currency in construction contracts and debt in local currency. Managing outright long risk
Slide 45: Interest rate and inflation risk management
Interest rate and inflation risk management Four risk categories of assets and debt allocation Objectives of interest rate and inflation risk management Illustrative 1. Protect long-term real value of equity by offsetting interest and inflation risk exposure embedded in assets by allocating debt wit
Slide 46: Energy risk management
Energy risk management Risk picture + We manage market risks to protect @rsted against market price volatility and ensure stable and robust financial ratios that support our growth strategy + For Offshore, a substantial share of energy production is subsidized through either fixed tariffs or green c
Slide 47: Investor Relations contacts
Daniel Lerup Rasmus Hærvig Dennis Callesen Head of Investor Relations Senior Investor Relations Officer Lead Investor Relations Officer DANIL@orsted.com RAKOL@orsted.com DECAL@orsted.com